The announcement that administrators were being called in was made last night at a brief but tense press conference by Trade and Industry Secretary Patricia Hewitt and Tony Woodley, leader of the Transport and General Workers Union.

Ms Hewitt said: "Tonight MG Rover has announced that their board had decided to call in the receivers.

"This is a devastating blow to all those involved - the workers and their families, the company's suppliers and the wider community. Tonight our thoughts are with them."

The company had warned earlier yesterday that time was running out on a proposed joint venture with SAIC after production at Longbridge was suspended when a number of local engineering firms decided to stop supplying components.

One firm, Wagon, said it was owed almost #1 million by MG Rover and it was clear supplies would not be resumed until there was a deal with SAIC.

The Government had previously insisted that a #100 million bridging loan was still available, provided there was a deal to be done between the two car makers.

A team of senior officials from the DTI travelled to China last week to try to secure a deal but it was clear last night that the talks had failed. A spokesman for SAIC said last night: "The requirement from SAIC was that MG Rover demonstrated to be solvent at the point of signing a deal and for two years thereafter.

"They have not been able to demonstrate that and therefore we are unable to negotiate a deal."

Earlier, a source said the #100 million Government loan would have burdened MG Rover even further and SAIC would not come to the aid of "drowning" company. Despite Ms Hewitt's announcement, there was some confusion as to whether the Longbridge firm had called in PricewaterhouseCoopers to act as administrators or just advisers. MG Rover said in a statement: "The board of MG Rover has asked PWC to accept engagement to advise the board of directors on the current position at the company.

"The management is committed to working closely with the trade unions, the DTI and the West Midlands agencies who can provide support. This is a deeply worrying time for everyone and our thoughts are with them and their families. We thank everyone for their loyalty and commitment at this very trying time."

Mr Woodley and Ms Hewitt will travel to Longbridge today to meet workers who will be devastated by last night's development.

Mr Woodley revealed that Tony Blair had a 25-minute call with a senior figure in the Chinese government as recently as last night.

He added: "The last thing we want to see is another supermarket on a car manufacturing plant."

Details of a support package will be announced today, but the Government has already made it clear it will offer help to re-train workers laid off at Longbridge. It is to set up a Rover taskforce led by Nick Paul, the chairman of Advantage West Midlands.

It has been estimated that for every lost job at Longbridge, another four in the supply chain could disappear.

John Lamb, from the Birmingham Chamber of Commerce, said: "There is going to be an awful lot of people on the market needing to be retrained and to get new jobs.

"The workforce and the supply chain need all the support we can give them.